BETHESDA, Md.–Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today announced that it executed a contract to acquire the AAA Four Diamond 119-room Inn on Fifth in Naples, Florida for $156.0 million. Upon completion of the acquisition, Pebblebrook will retain Noble House Hotels & Resorts (“Noble House”) to manage this unique independent luxury resort property at the center of Historic Downtown Naples. The purchase is expected to be completed by the end of the second quarter 2022 and is subject to customary closing conditions. The Company offers no assurances that this acquisition will be completed on these terms or at all.
The luxurious Inn on Fifth is well located in the heart of charming Old Naples, one of the country’s most exclusive and wealthy communities. Located just five blocks from the Fifth Avenue Beach, the resort property includes 119 guestrooms across two buildings (the Main and Club Level buildings), including 43 spacious suites. The Club Level Building features 32 elegantly appointed suites, a private rooftop with a jacuzzi, and an exclusive private lounge serving breakfast, cocktails, beverages, snacks, and hors d’oeuvres. The Main Building features the remaining 87 guest rooms and suites, as well as over 10,000 square feet of recently renovated and enhanced indoor and outdoor flexible meeting space, a 3,600 square foot outdoor pool deck providing food and beverage service, a day spa, a fitness center, and all guests of Inn on Fifth have access to 12 tennis courts at the adjacent Cambier Park Arthur Allen Tennis Center. The hotel also includes over 21,000 square feet of Naples’ most highly coveted ground-level retail spaces, all currently leased and occupied, featuring two of Old Naples’ most revered dining options, Truluck’s Restaurant and Ocean Prime, and upscale retail shops, including Vineyard Vines and an international luxury residential sales brokerage.
“We are extremely excited to acquire this premier Naples landmark resort in the high barrier to entry Naples market,” said Jon E. Bortz, Chairman, President, and Chief Executive Officer of Pebblebrook Hotel Trust. “The Inn on Fifth exemplifies South Florida’s effortless blend of upscale, laid-back luxury and was developed flawlessly and cared for meticulously by the current owner. This unique leisure-focused property is centrally located at the main intersection of Old Naples and is surrounded by over 30 restaurants, cafés, art galleries, and boutiques. The Inn on Fifth is well-positioned to benefit from Naples’ ongoing growth and desirability as an exclusive destination along South Florida’s Gulf Coast. In addition, Noble House’s expertise and track record in managing and marketing luxury hotels, including our LaPlaya Beach Resort & Club, should create tremendous value and operating synergies for the Inn on Fifth. The resort will also become part of Curator Hotel & Resort Collection, which is expected to generate a wide array of expense reductions combined with enhanced technology and operating initiatives.”
The rapidly growing Naples market features an irreplaceable mix of culture, arts, leisure, and promenades along more than 30 miles of white-sand beaches bordering the Gulf of Mexico. The market has recently developed a high concentration of the area’s banking, wealth management, and healthcare companies, attracting tourists and residents from across the globe. Naples shines as a drive-to leisure and tourist destination featuring a vibrant cultural scene with more than 100 art galleries, boutique shops, renowned art exhibits, annual events, and endless dining options. Guests at Inn on Fifth can also take advantage of the nearby access to the Fifth Avenue Beach via hotel shuttle service and premier shopping along Fifth Avenue. The Naples area also offers multiple golf options, eco-tourism attractions, yachting, watersports adventures, and many additional beaches and well-maintained state parks.
Pebblebrook is evaluating numerous operating and physical enhancements for additional upside and increased cash flow, including a development opportunity on the highly desirable 0.6-acre parcel adjacent to the hotel’s Main Building that is part of the acquisition.
Based on the estimated February 2022 trailing-twelve-month performance, the hotel generated total revenue per available room (“TRevPAR”) of $431, hotel earnings before interest, taxes, depreciation, and amortization (“hotel EBITDA”) of $11.3 million, and hotel net operating income (“hotel NOI”), after a 4% capital reserve, of $10.5 million. Preliminary March 2022 top-line results indicate dramatic further growth with March room revenues and total revenues beating March 2021 by over 40%, with a March 2022 average daily rate of over $1,000.
The acquisition of Inn on Fifth would bring the total number of properties in the Company’s portfolio to 54, including 12 unique drive-to, independent lifestyle resorts, and 6 properties in South Florida.
The Company intends to fund the acquisition with approximately $78.0 million of cash and intends to issue to the seller approximately $77.6 million of perpetual preferred operating partnership units (3.104 million units at $25.00 per unit) with an annual distribution rate of 6.0% and approximately $0.4 million of common units.